Question: Remember Center City Cake Shoppe? They now have a big business serving Philadelphia and its suburbs. They did not change the business model. The shop
RememberCenter City Cake Shoppe? They now have a big business serving Philadelphia and its suburbs. They did not change the business model.
The shop still spends $ in making each cake, and has a regular selling price of $
For every customer facing a stockout, the Cake Shoppe has estimated that there is a goodwill loss of $over and above the lost margin on that sale
Unsold cakes at the end of the day are sold below cost, at $ and are always sold off before the store closes for the night.
Their daily demand distribution is now:
DemandProbability
The optimal service level for this business is Select
Given this optimal service level, the optimal quantity to hold is Select
Given this optimal quantity, the expected sales is Select while the expected demand is Select
The fill rate is Select approximately.
Center City Cake Shoppe is going to earn the highest profit per day with the above service level, and that profit will be $ Select
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